Exhibit 10.4


 


*000700000015696*


 


BUSINESS
LOAN AGREEMENT


 


	Principal	Loan Date	Maturity	Loan No	Call
    / Coll	Account	Officer	Initials
	$1,178,391.18	12-18-2016	12-18-2018	15696		107560-1	10070	 
	References
in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.


Any item above containing “***” has been omitted due to text length limitations.










 


	Borrower:	Electromed, Inc.

500 Sixth Avenue NW    

New Prague, MN 56071	Lender:	Venture Bank 

Golden Valley Office 

6210 Wayzata
    Boulevard 

Golden Valley, MN 55416
	 	 	 	 


 


THIS BUSINESS LOAN AGREEMENT dated December
18, 2016, is made and executed between Electromed, Inc. (“Borrower”) and Venture Bank (“Lender”) on the
following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to
this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending
of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be
and remain subject to the terms and conditions of this Agreement.


 


TERM. This Agreement shall be effective
as of December 18, 2016, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender
have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until
such time as the parties may agree in writing to terminate this Agreement.


 


CONDITIONS PRECEDENT TO EACH ADVANCE.
Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment
to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.


 


Loan Documents. Borrower shall provide
to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in
the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance
as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance
satisfactory to Lender and Lender’s counsel.


 


Borrower’s Authorization. Borrower
shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution
and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions,
authorizations, documents and instruments as Lender or its counsel, may require.


 


Payment of Fees and Expenses. Borrower
shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement
or any Related Document.


 


Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under
this Agreement are true and correct.


 


No Event of Default. There shall not exist at the time
of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.


 


REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of
any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:


 


Organization. Borrower is a corporation for profit which
is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State
of Minnesota. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having
obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically,
Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify
would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own
its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains
an office at 500 Sixth Avenue NW, New Prague, MN 56071. Unless Borrower has designated otherwise in writing, the principal office
is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify
Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall
do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court
applicable to Borrower and Borrower’s business activities.


 


Assumed Business Names.
Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business:
None.


 


Authorization. Borrower’s execution,
delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by
Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s
articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any
law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.


 


Financial Information. Each of Borrower’s
financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement,
and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.


 


Legal Effect. This Agreement constitutes,
and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid,
and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.


 


Properties. Except as contemplated
by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender,
and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to


 






    	 



     


    

 


 


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LOAN AGREEMENT

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all of Borrower’s properties free and clear of all Security Interests,
and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are
titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the
last five (5) years.


 


Hazardous Substances. Except as
disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s
ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge
of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral
by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by
any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of
the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about
or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and
local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its
agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance
of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and
for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating
the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and
(2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties,
and expenses, including attorneys’ fees, consultants’ fees, and costs which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal,
release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement,
including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration
or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral,
whether by foreclosure or otherwise.


 


Litigation and Claims. No litigation,
claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending
or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties,
other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.


 


Taxes. To the best of Borrower’s
knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments
and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have been provided.


 


Lien Priority. Unless otherwise
previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the
filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment
of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights
in and to such Collateral.


 


Binding Effect. This Agreement,
the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their
successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.


 


AFFIRMATIVE COVENANTS. Borrower
covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:


 


Notices of Claims and Litigation.
Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.


 


Financial Records. Maintain its
books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books
and records at all reasonable times.


 


Financial Statements. Furnish Lender
with the following:


 


Interim Statements. As soon as available,
but in no event later than 45 days after the end of each month, Borrower’s balance sheet and profit and loss statement for the
period ended, prepared by Borrower.


 


Tax Returns. As soon as available,
but in no event later than 45 days after the applicable filing date for the tax reporting period ended, Borrower’s Federal and
other governmental tax returns, prepared by a tax professional satisfactory to Lender.


 


All financial reports required to be provided under this Agreement
shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.


 


Additional Information. Furnish
such additional information and statements, as Lender may request from time to time.


 


Additional Requirements.


 


1. Borrower must maintain a Minimum Tangible Net Worth of not
less than $10,125,000.00. Tangible Net Worth is defined as total capital plus debt subordinated to Venture Bank less intangible
assets. Intangible assets include but are not limited to goodwill, non-compete agreements, trademarks, notes due from related parties
and employee advances. Tangible Net Worth will be calculated quarterly based on SEC filed financial statements.


 


2. Borrower will maintain
their primary deposit accounts with Venture Bank.


 


COVENANTS REVIEWED
AND ACCEPTED BY:   /s/ JB    (initials).


 


Insurance. Maintain fire and other
risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties
and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations
that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act,
omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements
as Lender may require.


 


Insurance Reports. Furnish to Lender,
upon request of Lender, reports on each existing insurance policy showing such information as


 






    	 



     


    

 





	Loan No: 15696	BUSINESS
LOAN AGREEMENT

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Lender may reasonably request, including without limitation the
following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the
then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and
(6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any
Collateral. The cost of such appraisal shall be paid by Borrower.


 


Other Agreements. Comply with all
terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify
Lender immediately in writing of any default in connection with any other such agreements.


 


Loan Proceeds. Use all Loan proceeds
solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.


 


Taxes, Charges and Liens. Pay and
discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s
properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings,
and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with GAAP.


 


Performance. Perform and comply,
in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all
other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default
in connection with any agreement.


 


Operations. Maintain executive and
management personnel with substantially the same qualifications and experience as the present executive and management personnel;
provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable
and prudent manner.


 


Environmental Studies. Promptly
conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender
or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous
substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or
any facility owned, leased or used by Borrower.


 


Compliance with Governmental Requirements.
Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable
to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without
limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and
withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior
to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require
Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.


 


Inspection. Permit employees or
agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties
and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts,
and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records
and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request
of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower’s expense.


 


Compliance Certificates. Unless
waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial officer,
or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event
of Default exists under this Agreement.


 


Environmental Compliance and Reports.
Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or
occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity
is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice,
summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any
intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.


 


Additional Assurances. Make, execute
and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements,
instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans
and to perfect all Security Interests.


 


LENDER’S EXPENDITURES. If any action
or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with
any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay
when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s
behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging
or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral
and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date
of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable
on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become
due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as
a balloon payment which will be due and payable at the Note’s maturity.


 


NEGATIVE COVENANTS. Borrower covenants
and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:


 


Indebtedness and Liens. (1) Except
for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur
or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant
a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse
any of Borrower’s accounts, except to Lender.


 


Continuity of Operations. (1) Engage
in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate,
merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell


 






    	 



     


    

 



 


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    No: 15696	BUSINESS
    LOAN AGREEMENT

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Collateral
out of the ordinary course of business, or (3) pay any dividends on Borrower’s stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing
or would result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined in the Internal
Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership
of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s
capital structure.


 


Loans,
Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2)
purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.


 


Agreements.
Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s
obligations under this Agreement or in connection herewith.


 


CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy
or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition,
in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender;
or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.


 


RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with
Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively
freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.


 


DEFAULT.
Each of the following shall constitute an Event of Default under this Agreement:


 


Payment
Default. Borrower fails to make any payment when due under the Loan.


 


Other
Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.


 


False
Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf
under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or
furnished or becomes false or misleading at any time thereafter.


 


Insolvency.
The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment
of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout,
or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.


 


Defective
Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure
of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.


 


Creditor
or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the
Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.


 


Events
Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.


 


Change
in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.


 


Adverse
Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment
or performance of the Loan is impaired.


 


Insecurity.
Lender in good faith believes itself insecure.


 


Right
to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be,
has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor,
as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default:
(1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps
which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete
all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.


 


EFFECT
OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related
Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately
will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness
immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional.
In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may
be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect
Lender’s right to declare a default and to exercise its rights and remedies.


 


MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of this Agreement:


 


Amendments.
This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties 


 






    


     


    

 





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    LOAN AGREEMENT

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as
to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.


 


Attorneys’
Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable
attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit,
including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all
court costs and such additional fees as may be directed by the court.


 


Caption
Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.


 


Consent
to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more
participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have
with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective
of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against
Lender.


 


Governing
Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the
laws of the State of Minnesota without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in
the State of Minnesota.


 


No
Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No
prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute
a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.


 


Notices.
Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight
courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid,
directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s
address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless
otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed
to be notice given to all Borrowers.


 


Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance.
If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending
provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.


 


Subsidiaries
and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include
all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries
or affiliates.


 


Successors
and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents
shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the
prior written consent of Lender.


 


Survival
of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to
Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender,
all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents,
shall be continuing in nature, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall
be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.


 


Time
is of the Essence. Time is of the essence in the performance of this Agreement.


 


DEFINITIONS.
The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically
stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words
and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial
Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the date of this Agreement:


 


Advance.
The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s
behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.


 


Agreement.
The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified
from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.


 






    


     


    

 





	Loan
    No: 15696	BUSINESS
    LOAN AGREEMENT

    (Continued)	Page
    6
	 	 	 


 


Borrower.
The word “Borrower” means Electromed, Inc. and includes all co-signers and co-makers signing the Note and all
their successors and assigns.


 


Collateral.
The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form
of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.


 


Environmental
Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances
relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state
or federal laws, rules, or regulations adopted pursuant thereto, or common law, and shall also include pollutants, contaminants,
polychlorinated biphenyls, asbestos, urea formaldehyde, petroleum and petroleum products, and agricultural chemicals.


 


Event
of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the
default section of this Agreement.


 


GAAP.
The word “GAAP” means generally accepted accounting principles.


 


Grantor.
The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral
for the Loan, including without limitation all Borrowers granting such a Security Interest.


 


Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.


 


Guaranty.
The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all
or part of the Note.


 


Hazardous
Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or
physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment
when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances,
materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.


 


Indebtedness.
The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal
and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement
or under any of the Related Documents.


 


Lender.
The word “Lender” means Venture Bank, its successors and assigns.


 


Loan.
The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described
on any exhibit or schedule attached to this Agreement from time to time.


 


Note.
The word “Note” means the Note dated December 18, 2016 and executed by Electromed, Inc. in the principal amount
of $1,178,391.18, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions
for the note or credit agreement.


 


Permitted
Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower
to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens
of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property
acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security
interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those
liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower’s assets.


 


Related
Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental
agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in connection with the Loan.


 


Security
Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.


 


Security
Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present
and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale,
trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or
lien interest whatsoever whether created by law, contract, or otherwise.










 






    


     


    

 


	Loan
    No: 15696	BUSINESS
    LOAN AGREEMENT

    (Continued)	Page
    7
	 	 	 


 





BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT IS DATED DECEMBER 18, 2016.


 


BORROWER:


 


	ELECTROMED,
    INC.
	 	 	 
	By:	
    /s/ Jeremy Brock	 
	 	Jeremy
    Brock, Chief Financial Officer of Electromed, Inc.	 
	 	 	 
	LENDER:	 
	 	 	 
	VENTURE
    BANK	 
	 	 	 
	By:	/s/
    Kevin P. Doyle	 
	 	Authorized
    Signer	 
	 	 	 










LaserPro,
Ver. 16.3.10.005 Copr. D+H USA Corporation 1997, 2016. All Rights Reserved. - MN c:\APPS\CFI\CFI\LPL\C40.FC TR-6873 PR-22